Navigating Singapore’s property market can be both exciting and challenging, especially when it comes to understanding the various taxes and fees involved. One such crucial levy is the Additional Buyer’s Stamp Duty (ABSD), a tax introduced to moderate the demand for residential properties and ensure a sustainable property market. Whether you're a local, a permanent resident, or a foreign investor, understanding how ABSD impacts your property purchase is essential. In this blog, we delve into the latest ABSD rates for 2024, helping you make informed decisions in your property investment journey.
Understanding ABSD
The Additional Buyer’s Stamp Duty (ABSD) is a tax imposed by the Singaporean government on the purchase of residential properties. It is payable in addition to the standard Buyer’s Stamp Duty (BSD) and is calculated as a percentage of the purchase price or market value, whichever is higher. The ABSD was introduced as part of Singapore’s property cooling measures to ensure a sustainable property market by curbing speculative buying and stabilising property prices. The ABSD applies to Singapore citizens, Singapore permanent residents, and foreigners buying residential properties in Singapore.
Additional Payment Beyond BSD
The ABSD is paid alongside the Buyer’s Stamp Duty (BSD), a mandatory tax on property transactions in Singapore. While the BSD applies to all property purchases, the ABSD is an additional tax imposed on specific groups of buyers and situations. The ABSD and BSD are both calculated based on the purchase price or market value of the property, whichever is higher, and must be paid before the statutory completion of the sale and purchase agreement. The ABSD rates applicable vary depending on the buyer’s residency status and the number of residential properties owned at the time of purchase.
Purpose Behind ABSD Implementation
The Singaporean government introduced the ABSD on 8 December 2011 as part of a broader set of property cooling measures aimed at stabilising the residential property market. The main objective was to prevent excessive speculation, which had driven property prices to unsustainable levels, creating potential risks for the economy. By imposing an additional tax on the purchase of multiple properties, the government aimed to discourage speculative buying and promote a more sustainable property market, making housing more affordable for Singaporeans.
Since its introduction, the ABSD has undergone several revisions, with the latest update announced on 27 April 2023. These revisions have progressively increased the ABSD rates to further discourage speculative investments and ensure that the residential property market remains stable and accessible to genuine home buyers.
ABSD’s Effect on the Property Market
The introduction of the Additional Buyer’s Stamp Duty has had a significant impact on Singapore's residential property market. It has effectively curbed speculative buying, leading to a moderation in property price increases and contributing to a more stable and sustainable property market. The ABSD has also influenced the behaviour of potential buyers, particularly those purchasing multiple properties, as they are now required to pay higher ABSD rates.
The implementation of the ABSD has also led to changes in the composition of property buyers. For example, the higher ABSD rates applicable to foreigners buying residential properties have resulted in a decrease in foreign investment in the Singaporean property market. Similarly, the introduction of different ABSD rates for Singapore citizens, Singapore permanent residents, and foreigners has influenced the types of properties being purchased and the strategies employed by property investors.
Overall, the ABSD has played a crucial role in stabilising property prices and ensuring that the residential property market remains sustainable in the long term.
Who Is Liable for ABSD?
The ABSD is payable by various categories of buyers, depending on their residency status and the number of residential properties they own. The ABSD rates applicable are determined based on the buyer’s residency status, the number of properties they already own, and the purchase price or market value of the property, whichever is higher.
Singapore Citizens: Singapore citizens are required to pay ABSD when purchasing their second residential property and any subsequent properties. The ABSD rate for the second property is lower than the rate for third and subsequent properties.
Singapore Permanent Residents: Singapore permanent residents are subject to ABSD on their first and subsequent residential property purchases. The ABSD rates for permanent residents are higher than those for Singapore citizens.
Foreigners: Foreigners buying any residential property in Singapore are subject to the highest ABSD rates, reflecting the government’s intention to prioritise local home buyers and limit foreign speculation.
Housing Developers: Housing developers purchasing residential properties for redevelopment are also subject to ABSD, although they may be eligible for an ABSD remission if they meet certain conditions set by the government.
ABSD Obligations
The ABSD liability is determined based on several factors, including the buyer's residency status, the number of existing residential properties owned, and the transaction cost or market value of the property. The ABSD is calculated as a percentage of the transaction cost or market value, whichever is higher, and is payable within 14 days of signing the sale and purchase agreement.
The ABSD rates are tiered, with higher rates applicable to buyers who own more properties. For example, Singapore citizens buying their first residential property are exempt from ABSD, but they are required to pay a higher ABSD rate on their second residential property and an even higher rate on their third and subsequent properties. Similarly, Singapore permanent residents buying their first residential property are subject to ABSD, and the rate increases for subsequent property purchases.
Foreigners buying any residential property in Singapore are subject to the highest ABSD rate, reflecting the government’s policy to prioritise Singapore citizens and permanent residents in the residential property market.
Timing for ABSD Payment
The Additional Buyer’s Stamp Duty (ABSD) is a tax that must be paid when a sale and purchase agreement is executed for the acquisition of a residential property in Singapore. The ABSD, along with the Buyer’s Stamp Duty (BSD), is payable within 14 days of signing the sale and purchase agreement if the document is executed in Singapore. If the agreement is signed overseas, the payment must be made within 30 days. The ABSD is calculated based on the purchase price or the market value of the property, whichever is higher. Payment can be made through the e-Stamping portal, which is the official platform for stamp duties in Singapore.
For transactions involving multiple buyers, the highest applicable ABSD rate among the buyers will be imposed on the property purchase. It is crucial to ensure timely payment, as late payment of ABSD can result in penalties and legal fees, impacting the overall cost of the property purchase.
ABSD Trust Arrangements
ABSD applies to residential properties purchased through a trust, where the property is held for the benefit of one or more beneficiaries. The ABSD Trust is levied on the trust itself, and the applicable ABSD rate is determined based on the residency status of the beneficial owners. If the beneficial owners include a Singapore citizen buying their first property, no ABSD is payable. However, if the trust’s beneficiaries include foreigners or Singapore permanent residents, the relevant ABSD rates for these profiles will apply.
In some cases, ABSD paid on properties held in trust may be eligible for ABSD remission or refund, depending on the specific circumstances and the government’s regulations. It is essential for trustees to consult with legal professionals to ensure compliance with ABSD requirements and to explore any possible ABSD refund opportunities.
Buyer Characteristics
The ABSD liability varies depending on the buyer’s profile, including factors such as residency status and the number of existing properties owned.
Singapore Citizens: For a Singapore citizen buying their first property, no ABSD is applicable. However, ABSD applies when purchasing a second residential property, with a higher rate imposed for a third residential property and any subsequent property purchases. The government introduced these measures as part of cooling measures to stabilise property prices and curb speculative buying.
Singapore Permanent Residents: Singapore permanent residents are subject to ABSD when purchasing any residential property, including their first property purchase. The ABSD rate increases with the acquisition of a second residential property and subsequent properties.
Foreigners: Foreign buyers face the highest ABSD rates when buying any residential property in Singapore. This reflects the government's priority to make housing units more accessible to Singapore citizens and permanent residents, and to deter foreign speculative investments.
Entities: Corporate entities and housing developers are also subject to ABSD, which is non-remittable in most cases. Specific ABSD rates apply to entities based on the nature of the property purchase, whether it's for development or investment purposes.
Counting Residential Properties Owned
The number of residential properties a buyer owns plays a significant role in determining their ABSD liability. For Singapore citizens, the ABSD rate applies only to the purchase of a second property and increases with the purchase of a third and subsequent residential property. For Singapore permanent residents, the ABSD applies even on their first property purchase, with higher rates for subsequent property acquisitions.
For buyers who already own multiple properties, the ABSD rate is progressively higher. The government’s intent with these escalating ABSD rates is to reduce the demand for multiple properties, thereby helping to maintain a stable and sustainable property market. Potential buyers should carefully consider their existing property portfolio before purchasing additional properties to avoid incurring high ABSD costs.
Distinguishing Entities vs Individuals
When purchasing a residential property, the distinction between entities and individuals is critical in determining the applicable ABSD rate. Entities, including housing developers and companies, are subject to ABSD on their property purchases, often at higher rates than individuals. Moreover, ABSD paid by entities is generally non-remittable, unlike in certain situations for individual buyers.
Buying a property with another person can also affect the ABSD rate. For example, if a Singapore citizen buys a property with a foreigner or Singapore permanent resident, the ABSD rate will be determined based on the profile with the highest applicable ABSD rate. Therefore, buyers should assess the implications of purchasing a property jointly to avoid higher tax liabilities.
Comparison Between Singapore Citizens and Permanent Residents
The difference in ABSD liability between Singapore citizens and Singapore permanent residents is one of the key distinctions in Singapore’s property tax regime.
Singapore Citizens: No ABSD is imposed on the initial home purchase for Singapore citizens. However, they are liable to pay ABSD when purchasing a second residential property, and the rate increases for the purchase of a third and subsequent properties. This tiered system encourages citizens to focus on owning a home rather than investing in multiple properties.
Singapore Permanent Residents: Singapore permanent residents are required to pay ABSD even on their first property purchase, with rates escalating for the second residential property and any subsequent properties. This policy reflects the government’s intent to manage the demand for housing from non-citizens while ensuring that Singapore citizens have priority access to the residential property market.
Given these differences, it is essential for Singapore permanent residents to carefully consider their property investment strategies, as the ABSD can significantly impact the overall cost of acquiring additional residential real estate. Understanding the nuances of ABSD rates and liabilities for different residency statuses can help buyers make informed decisions and avoid unexpected costs during property transactions.
ABSD Calculation Process
ABSD is calculated based on the purchase price or the market value of the property, whichever is higher. The ABSD rate varies depending on the buyer’s profile, including factors such as residency status and the number of existing properties owned. The ABSD is levied on top of the standard Buyer’s Stamp Duty (BSD), making it an additional cost that potential buyers must consider when purchasing residential real estate.
To compute the ABSD, one must first determine the applicable rate based on the buyer's profile and the number of residential properties already owned. The ABSD is then calculated as a percentage of the property’s market value. For instance, if a Singapore permanent resident is buying a second residential property, the ABSD is calculated using the corresponding rate for that scenario. It’s important to note that ABSD is charged on the marginal rate for each tier of property value, similar to how income tax is calculated.
The formula for calculating the Additional Buyer’s Stamp Duty (ABSD) is as follows:
ABSD = Market Value or Property Purchase Price x ABSD Rate
Where:
Property Market Value or Purchase Price: The higher of the two values is used for the calculation.
ABSD Rate: This rate varies depending on the buyer's profile (e.g., Singapore Citizen, Permanent Resident, or Foreign Buyer) and the number of properties they own.
Table of Current ABSD Rates in 2024
Below is a summary of the ABSD rates applicable as of 2024. The table includes the profile of the buyer and the corresponding ABSD rates:
The government announced these ABSD rates as part of its property cooling measures, aiming to stabilise the residential property market and prevent excessive speculation.
Steps to Pay ABSD
Paying the Additional Buyer’s Stamp Duty (ABSD) is a straightforward process, but it must be completed within specific timelines to avoid penalties. The payment can be made through the Inland Revenue Authority of Singapore’s (IRAS) e-Stamping portal. Here’s a step-by-step guide:
Access the e-Stamping Portal: Visit the IRAS e-Stamping portal online. This platform allows you to complete the stamp duties process, including the payment of ABSD, without needing to visit a physical office.
Complete the Necessary Information: Fill in details such as the buyer’s profile, the residential property’s details, and the purchase price or market value, whichever is higher. The portal will automatically calculate the ABSD based on the information provided.
Make the Payment: Once the ABSD amount is calculated, you can make the payment using various methods, including internet banking, GIRO, or cashier's order. Ensure that the payment is made within 14 days from the date of the sale and purchase agreement (if executed in Singapore) or 30 days (if executed outside Singapore).
Completing the ABSD Declaration Form
When paying ABSD, the buyer must submit an ABSD Declaration Form. This form requires detailed information about the buyer’s profile, including residency status and the number of residential properties currently owned. The form must be accurate, as any discrepancies may lead to legal issues or delays in processing the stamp duty.
The declaration form is a crucial document, especially for those claiming ABSD remission, such as married couples with at least one Singapore citizen spouse. The declaration must be completed truthfully to avoid any implications related to tax avoidance, which could result in severe penalties.
Full Payment Requirements
The ABSD must be paid in full within the stipulated timelines, as partial payments are not accepted. Delaying or failing to pay the full amount can result in late payment penalties, additional interest charges, or even legal action. Since the ABSD is a significant financial commitment, buyers should ensure they have sufficient funds to cover both the purchase price and the applicable stamp duties before committing to a property purchase.
For those using Central Provident Fund (CPF) savings to pay the ABSD, it's important to ensure that CPF withdrawal arrangements are made promptly. Any delays in processing CPF withdrawals could impact the timely payment of ABSD, resulting in penalties.
No Deferral Option
Unlike some other financial obligations, the payment of ABSD cannot be deferred. Once the sale and purchase agreement is signed, the ABSD must be paid within the prescribed time limits. The inability to defer payment ensures that the government’s property cooling measures are effective and that speculative buyers are discouraged from purchasing multiple residential properties without careful consideration.
Using CPF Savings
The Central Provident Fund (CPF) can be used to pay the ABSD, but specific conditions must be met. Buyers intending to use their CPF savings should first check that the CPF withdrawal amount is sufficient to cover the full ABSD amount. The use of CPF for ABSD payment is subject to CPF Board approval, and the process must be initiated well in advance of the payment deadline.
Additionally, it's essential to note that the use of CPF to pay ABSD does not exempt the buyer from the requirement to pay the full amount on time. The CPF Board will coordinate the withdrawal and payment process, but any delays in processing could lead to penalties if the ABSD payment is not made within the stipulated timeframe.
Strategies to Minimise or Avoid ABSD
The Additional Buyer’s Stamp Duty (ABSD) is a significant consideration for anyone buying residential property in Singapore, particularly for those purchasing a second property or more. However, there are legal strategies and options that can help lessen or avoid ABSD. This article will explore these strategies, offering insights into how home buyers, especially Singapore citizens buying additional properties, can navigate the ABSD landscape effectively.
1. ABSD Trust Remission
One of the ways to lessen or avoid the ABSD is through the remission of ABSD under a trust. This strategy is particularly useful for parents who intend to purchase a property for their child. When a residential property is purchased under a trust, the beneficial ownership lies with the child. As long as the child does not already own any residential property, the purchase would be considered as acquiring a first residential property under their name, potentially qualifying for ABSD remission.
However, it’s important to note that the conditions for ABSD remission under a trust are stringent. The child must be the sole beneficial owner, and the trust must be irrevocable. Legal advice is crucial to ensure that all conditions are met and that the arrangement complies with Singapore’s property laws, thereby avoiding any pitfalls related to tax avoidance.
2. Leveraging Free Trade Agreements
Singapore has signed several Free Trade Agreements (FTAs) with other countries, and some of these agreements include provisions that may reduce the ABSD liability for certain foreign nationals. For instance, nationals from countries such as the United States, Switzerland, Norway, and Iceland may be eligible for the same ABSD rates as Singapore citizens when buying their initial residential property in Singapore.
This means that under these FTAs, qualifying nationals may avoid the higher ABSD rates typically applied to foreigners buying any residential property. However, it’s crucial for potential buyers to check the specific terms of the FTA applicable to their country of nationality and ensure that they meet all required conditions to benefit from these reduced ABSD rates.
3. Purchasing Under a Single Name
For married couples or joint property buyers, another strategy to lessen ABSD is to purchase the second property under one owner’s name, particularly if one spouse has not yet acquired any residential property. This approach allows the couple to enjoy the lower ABSD rate applicable to a initial residential property purchase.
However, while this strategy may help reduce ABSD liability, it is essential to carefully consider the legal and financial implications, such as the ownership structure and potential risks associated with joint property ownership. Additionally, legal advice should be sought to ensure compliance with Singapore’s property laws and to avoid any issues related to seller's stamp duty or other regulatory requirements.
4. Decoupling
Decoupling is another method that some homeowners consider to reduce their ABSD liability. This process involves one spouse transferring their share of the property to the other spouse, thereby allowing one party to buy another property as a first-time buyer, thus incurring a lower ABSD rate.
While decoupling can be an effective strategy, it is crucial to ensure that the process is carried out legally and transparently to avoid any potential tax avoidance issues. Decoupling may also involve additional costs such as legal fees, and it is essential to factor these into the overall cost-benefit analysis. Home buyers should engage legal professionals to handle the decoupling process to ensure compliance with Singapore’s property laws and regulations.
5. Upgrading to a New Executive Condominium
For Singapore citizens considering upgrading from an HDB flat to a private property, an attractive option is to purchase a new Executive Condominium (EC). New ECs are treated as public housing for the first 10 years and are therefore not subject to ABSD. After the 10-year period, they become private properties and may be sold on the open market.
This strategy allows Singapore citizens buying their second property to avoid paying ABSD during the initial purchase of the EC, which can be a substantial saving. However, it is important to note that once the EC is fully privatised after 10 years, any subsequent purchase of a residential property will attract ABSD based on the number of properties owned.
6. Investing in Dual Key Units
Another way to potentially lessen ABSD liability is by purchasing a dual key unit. Dual key units consist of two separate living spaces within one property, typically a main unit and a smaller unit, such as a studio apartment. These units can be particularly attractive to home buyers who wish to stay in one unit while renting out the other, effectively using one property for dual purposes.
Since dual key units are considered a single property under Singapore’s property laws, buying a dual key unit may allow home buyers to avoid the ABSD that would otherwise apply if they purchased two separate properties. However, potential buyers should be aware of the implications for stamp duties and seek legal advice to ensure they fully understand the ownership structure and any related tax obligations.
7. Buying Property Under Your Child’s Name
Purchasing a property under your child’s name is another strategy to avoid ABSD, particularly if the child does not already own any residential property. This approach allows the child to benefit from the ABSD exemption for first-time home buyers.
However, it’s important to consider the long-term implications of this strategy, including the child’s future financial situation, inheritance considerations, and the potential need for the child to sell the property in the future. Additionally, the transfer of ownership to the child must be carried out legally and in compliance with Singapore’s property laws to avoid any issues related to tax avoidance.
8. Considering Commercial Properties
Another effective way to avoid ABSD altogether is by investing in commercial properties instead of residential properties. ABSD only applies to the purchase of residential property in Singapore, so buying commercial properties such as office spaces, retail units, or industrial properties can be a viable alternative for those looking to diversify their property investments without incurring ABSD.
While commercial properties are not subject to ABSD, buyers should still consider other costs associated with purchasing commercial properties, such as buyer's stamp duty and other potential taxes. It is also important to note that the commercial property market operates differently from the residential property market, and potential investors should conduct thorough research or seek professional advice before making a purchase.
ABSD Reimbursement Options
Buyers can benefit from exemptions from the Additional BUyer's Stamp Duty or even receive refunds in certain situations. Understanding these can help Singapore citizens, permanent residents, and foreigners navigate their property purchases more effectively.
Refunds for Single Singapore Citizen Seniors Aged 55+
For single Singaporean citizens aged 55 and above, the government has provisions that allow for an ABSD refund under certain conditions. If a senior citizen purchases a second residential property, they may be eligible for a refund of the ABSD paid, provided they dispose of their initial residential property within a specific timeframe.
To qualify for the ABSD refund, the senior must sell their initial residential property within six months of purchasing the second property, or within six months of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) for uncompleted properties. This allows seniors to downsize or move to a more suitable home without incurring the full cost of ABSD on their new property.
Selling Your First Property Within 6 Months of TOP/CSC
Another common scenario where an ABSD refund may be applicable is when a buyer disposes of their first residential property within six months of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) of their newly purchased property. This is particularly relevant for those upgrading from an HDB flat to a private condominium.
To be eligible for the refund, the buyer must meet the following conditions:
The buyer must be a Singapore citizen purchasing a second property.
The first residential property must be sold within six months of the date of purchase of the second property, or within six months of the TOP/CSC if the second property is uncompleted.
The application for the refund must be submitted within six months after the sale of the residential property.
This refund scheme is designed to facilitate the upgrading process, ensuring that Singapore citizens do not face an unnecessary financial burden when moving to a new home.
Property Transfers for Married Couples
Married couples who are Singapore citizens may also be eligible for an ABSD refund when purchasing a second residential property, provided they dispose of their first property within a stipulated period. This refund applies if one spouse already owns a residential property and the couple jointly purchases a new property.
The conditions for eligibility include:
The couple must sell their first property within six months of purchasing the second property, or within six months of the TOP/CSC if the second property is uncompleted.
The new property must be purchased under both spouses’ names, and at least one spouse must be a Singapore citizen.
The couple must apply for the refund within six months of the sale of the first property.
This scheme encourages home ownership among Singapore citizens and supports married couples in upgrading their homes without the added financial burden of ABSD.
Wrap Up
Understanding the intricacies of Additional Buyer’s Stamp Duty (ABSD) is vital for anyone looking to invest in Singapore’s property market. From its initial introduction to its significant impact on property transactions, ABSD plays a crucial role in shaping buying decisions. Whether you’re a Singapore Citizen, Permanent Resident, or foreign investor, knowing when and how to pay ABSD, as well as exploring potential ways to reduce or avoid it legally, can make a substantial difference in your property investment journey.
By staying informed and planning strategically, you can navigate the complexities of ABSD with confidence, ensuring that your property transactions are both compliant and financially sound..
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